Posts Tagged ‘reshoring’

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Import Penetration Still Outweighs Reshoring Trend

Monday, March 11th, 2013

In January, the U. S. Business and Industry Council released a report, “Import Penetration Rises again in 2011; Challenges Manufacturing Renaissance, Insourcing Claims,” by Alan Tonelson. According to the report,” the share of U.S. markets for advanced manufactured goods controlled by imports reached another all-time high in 2011… and domestic manufacturing’s highest value sectors keep falling behind foreign-based rivals.”

The USBIC report shows that “imports captured 37.57 percent of the collective $2.01 trillion American market in 2011 for a group of more than 100 advanced manufactured products,” up from 37.07 percent in 2010. When government data to calculate import penetration rate were first issued in 1997,”imports controlled 24.49 percent of substantially the same group of U.S. manufactured products.”

“Fully 29 of the 106 sectors for which reliable data were available featured import penetration rates of 50 percent or more in 2011. In 2010, 31 of these industries had lost half of their home U.S. market to imports, and in 1997, only 8 of the 114 sectors initially studied were in this situation.”

Between 1997 and 2011, 98 industries lost shares of their home market while only 8 gained shares. The industries that gained shares are:  “semiconductor machinery; saw mill products; paperboard mill products; motor vehicle stamping operations; transformer, inductor, and coil manufacturing; electron tubes; computer storage devices; and heavy duty trucks and chassis.”

The 98 industries include:  “semiconductors; electro-medical apparatus; pharmaceuticals; turbines and turbine generator sets; construction equipment; farm machinery and equipment; mining machinery and equipment; several machine tool-related categories; and ball and roller bearings.”

The report states that “from 1997-2011, output fell in 38 of the 106 total industries studied over this time span – nearly 36 percent of the total. These ‘declining’ industries include electricity measuring and test instruments; relays and industrial controls; motors and generators; motor vehicle engines and engine parts; several machine tool-related categories; and environmental controls.” In 11 more sectors, output growth was less than 10 percent, “including semiconductors; semiconductor production equipment; motor vehicle transmission and power train equipment; miscellaneous industrial machinery; and medicinals and botanicals.”

Mr. Tonelson writes, “High and rising import penetration rates for this many critical domestic industries over nearly a decade and a half represent powerful evidence of chronic, significant weakness in domestic manufacturing.”

In a section titled, “The Manufacturing Renaissance that Isn’t, he disputes the predictions of the Boston Consulting Group’s 2011 report, “Made in America, Again: Why Manufacturing Will Return to the U.S.” This report contends that American manufacturing would experience a renaissance because of rising costs in China and other parts of Asia so there would be a convergence in the total costs of manufacturing by some regions of the U. S. by 2015.

If U. S. manufacturers are still losing market share to foreign competitors through import penetration in their home market, this is a sign that “the United States has not even started to become “increasingly attractive for the production of many goods sold to consumers in North America” as predicted by the Boston Consulting Group, much less experiencing a Manufacturing Renaissance.

What is even more troubling to Mr. Tonelson is that the USBIC report focuses on the capital-and technology-intensive sectors that are “keys to maintaining national prosperity, technological leadership, and national security.”  The report shows that “dozens of America’s most advanced manufacturing industries are becoming just as vulnerable to import competition – and in some cases to import domination – as labor-intensive industries like clothing and toys.”

He concludes that the conventional stimulus strategies have had the disappointing results of “less growth and employment bang per investment-target stimulus buck with each passing year” because “U. S. imports of capital goods as such generates much less American output supported by much less American employment than purchases of domestically produced capital goods.”

In his opinion, President’s Obama’s goal of doubling exports during the 2009-2014 period isn’t going to improve the situation either when imports keep rising faster than exports. While there was a 15.45 percent improvement from 2010 to 2011, the January-October 2012 period only showed a 4.56 percent improvement.

Mr. Tonelson points out that negotiating new trade agreements isn’t producing the desired effect of increasing exports. The latest agreement negotiated with Korea has had the opposite effect  ? U. S. exports to Korea dropped by more than 18 percent while imports from Korea are up 4.74 from when it came into force in March 2012.

He concludes that the continued rise of import penetration in the U. S. indicates that American industry is losing ground relative to foreign-based competitors and “the nation is not making enough of the structural changes needed to create healthy growth and avoid reflating the last decade’s credit bubble.”

In an interview by Richard McCormack in the January 15, 2013 issue of Manufacturing & Technology News, Mr. Tonelson, stated, “I think the only way that these trends reverse meaningfully is if American trade policy changes. Unless we reduce the incentives of U.S. companies and companies all over the world to supply the U.S. market from overseas, this tide will not turn.”

While reducing the incentives of U. S. companies and foreign companies to supply the U. S. market from overseas is an important step in turning the tide, it would be the first of many steps we need to take. As I have written previously, we need to change our trade, tax, and regulations policies to help U. S. manufacturers be more competitive in both their home market and the global marketplace. We need to develop a national manufacturing strategy that would address all of the various factors that are resulting in the decline in the decline in the United States’ share of the global manufacturing output.

I did take exception to Mr. Tonelson’s dispute of the predictions of the Boston Consulting Group’s report and told him that the data is lagging reality ? “reshoring” is happening. As a manufacturers’ sales rep for American companies that perform fabrication services, I am in the “trenches” competing with offshore companies. Nearly every manufacturer I represent has experienced gaining new customers that are “reshoring” manufacturing from China. I have interviewed dozens of companies at trade shows over the past year and a half, and every company I interviewed had experienced “reshoring.” Nearly all of the San Diego region’s contract manufacturers of electronic manufacturing services have benefitted from “reshoring” in the past year.

The Reshoring Initiative, founded by Harry Moser in 2010, has documented case studies of companies reshoring. In the article, “Pumping Muscle into U.S. Manufacturing,” by Craig Barner in the March 6, 2013 issue of Forbes magazine, Mr. Moser said, “For example, about 220 to 250 organizations have brought manufacturing back to the U.S….with the heaviest migration from China. This represents about 50,000 jobs, which is 10% of job growth in manufacturing since January 2010, he said.”

“The top reshoring industries include electrical equipment, appliances and components; transportation equipment; and machinery, Moser said. Key reasons for returning to the U.S. include rising wages offshore, better quality of goods produced in the U.S., easier access to repairs and lower delivery costs, he said.”

On March 4, 2013, Prime Advantage, the leading buying consortium for midsized manufacturers, announced the findings of its eleventh semi-annual Group Outlook Survey. “A large majority — more than 70% of respondents — have increased their material and service purchases from American suppliers and service providers. Mexico is the second choice for sourcing, with nearly 28% of respondents moving sourcing to that region. The most frequently cited benefits that manufacturers hope to see in nearshoring are shorter lead times, as indicated by 67% of respondents, and lower inventories (49%). Among other benefits, companies cited better supply chain control (40%) and better overall communication (39%).”

If more American manufacturers would utilize the free Total Cost of Ownership Estimator™ developed by Harry Moser, more companies would understand the benefits of “reshoring” and foster a true renaissance in American manufacturing.

 

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Posted in Economy, Manufacturing, Outsourcing, Reshoring, Trade Policy | 2 Comments »

What Do American Manufacturers Owe Their Country?

Tuesday, February 5th, 2013

Last week The Economist conducted an on-line debate on the question:  Do multinational corporations have a duty to maintain a strong presence in their home countries? After a very intense written debate between Harry Moser, former president of GF AgieCharmilles  and founder of the Reshoring Initiative, and Jagdish Bhagwati, Professor of Economics and Law, Columbia University, the vote was 54% “yes,” and 46% “no.”

The moderator of the debate was Tamzin Booth, European business correspondent for The Economist, who introduced the topic by stating, “after the Great Recession, with high levels of unemployment persisting in rich countries, politicians are putting enormous pressure on firms to either keep operations at home or bring them back. The offshoring and outsourcing of work overseas have never been more unpopular. So strong is the backlash against firms which shift jobs abroad that many companies are choosing not to do it for fear of igniting a public outcry. And a “reshoring” trend, bringing factories home to America from China and elsewhere, is gathering pace and support from several American multinationals, including General Electric and Ford Motor Company.”

While Mr. Moser acknowledges that multinational corporations (MNCs) “have a responsibility to enhance shareholder return and obey relevant laws and regulations,” he believes that “MNCs also have a duty to maintain a strong presence in their country of origin,” which he defines “as investing, employing, manufacturing and sourcing at least in proportion to their sales in the origin country.”

He states, “This duty has two sources. The first is a quid pro quo for the special benefits that their charter provides. The second is based on understanding that a strong presence is almost always in the interest of their shareholders.”

In his pro argument for the first duty, Mr. Moser quotes Clyde Prestowitz: “Corporations are not created by the shareholders or the management. Rather they are created by the state. They are granted important privileges by the state (limited liability, eternal life, etc). They are granted these privileges because the state expects them to do something beneficial for the society that makes the grant. They may well provide benefits to other societies, but their main purpose is to provide benefits to the societies (not to the shareholders, not to management, but to the societies) that create them.”

This view is corroborated by a recent essay, “The American Corporation,” by Ralph Gomory and Richard Sylla, in which they provide a brief history of corporation formation in America. From 1790 to 1860, over 22,000 corporations were chartered under special legislative acts by states, and

several thousand more were chartered under general incorporation laws introduced in the 1840s and 1850s. These state granted charters were not perpetual and had to be renewed periodically, “with its “powers, responsibilities?including to the community?and basic governance provisions carefully specified.”

The essayists comment that general incorporation laws were the answer to the problem of corruption in legislative chartering, but created their own problems in the late 19th Century with the rise of “Robber Barons, both the business leaders who amassed great power and wealth in the rise of mass-production and mass-distribution industries, and the great financiers of Wall Street who collaborated with them.” The concentration of wealth and power in the hands of so few led to the passage of antitrust laws and corporate regulations at both the federal and state levels regulations in the 20th Century to prevent or rein in monopolies.

The stock market crash of 1929 and the Great Depression resulted in a multitude of “New Deal” reforms and regulations on the corporate and financial sectors to protect and inform stockholders and the general public.

Gomory and Sylla write that for decades after WWII, “the problem of corporate goals seemed under control,” and “the interests of managers, stockholders workers, consumers and society seemed well aligned” while the U. S. and the Soviet Union were fighting a Cold War.

As late as 1981, the U. S. Business Roundtable issued a statement recognizing the stewardship obligations of corporations to society:  “Corporations have a responsibility, first of all, to make available to the public quality goods and services at fair prices, thereby earning a profit that attracts investment to continue and enhance the enterprise, provide jobs, and build the economy.” In addition, “The long-term viability of the corporation depends upon its responsibility to the society of which it is a part. And the well being of society depends upon profitable and responsible business enterprises.”

Establishing plants in another country in order to do business in that country and be closer to your customers is a reasonable business decision for many companies whose products are sold globally, such as Coca Cola and other food and beverage manufacturers. I concur with Mr. Moser’s statement. “We do not question multinational companies’ right to invest offshore.” However, it is another thing to transfer all or most of the manufacturing of your products to be sold mainly in the U. S. market to another country, at the cost of hundreds, if not thousands, of American jobs.

This brings us to Mr. Moser’s second pro argument to the question; namely, “a strong presence is almost always in the interest of their shareholders.” He states that his experience with the Reshoring Initiative’s free Total Cost of Ownership Estimator™ has shown that “in their excessive focus on offshoring of manufacturing, many MNCs make suboptimal decisions, actually reducing the long-term return to their shareholders. Thus many MNCs will more fully maximise returns for shareholders if they maintain a stronger presence.”

This is because most MNCs do not accurately measure the “Total Cost of Ownership” or “landed costs” in making decisions regarding where to manufacture their products. They ignore the “hidden costs” of doing business offshore about which I have written extensively in my book , such as:  quality problems, legal liabilities, currency fluctuations, travel expenses, difficulty in making design changes, time and effort to manage offshore contract, and cost of inventory.

In addition, Mr. Moser states that the behaviors of MNCs include:

  • “Ignoring a whole range of medium-term risks: IP loss; impact on innovation; and loss of competence and control due to increasing reliance on offshore outsourcing firms. The further a firm is removed from the manufacturing of its products, the harder it is to evolve and make future related products.
  • Ignoring longer-term catastrophic risks associated with shifting their presence offshore, including the decline in American economic, technological and military strength: risk of losing sales and assets in developing countries, especially when competing with local state-owned enterprises (SOEs); loss of the government-funded R&D that gives them a head start in many technologies; loss of strong origin-country defence and legal systems that protect the corporate charter; loss of “Pax Americana” that protects their trade around the world; and populist calls for anti-MNC political actions resulting from income inequality driven by a shriveling middle class.”

One important risk that Mr. Moser did not mention is the risk of theft of Intellectual Property by offshore manufacturers, especially in China. For many years, China has been doing this by reverse engineering, counterfeiting, and cyber espionage, but it has been made easier in the past two years by the mandatory technology transfer required by the Chinese government for corporations who set up plants in China.

In his con argument, Professor Bhagwati asserts that global sourcing and locating plants around the world has happened already, and “there is little point in tilting at reality.” He states, “Multinationals’ products, after all, can now hardly even be defined as American, French or any other nationality when their parts come from every corner of the world. All that matters, he argues, is that worldwide operations bring profits to the multinational, thereby benefiting the country in which it is headquartered. , “MNC investment abroad is good, not bad, for America unless it is a result of distorting tax policies that lead to overinvestment abroad. Asking MNCs to have a presence at home, and subsidising or forcing them under threat of penalties to do so, makes little sense unless you claim that this presence produces some externalities…the benefits to the MNC, and hence to America most likely, will accrue regardless of where the MNC does R&D, in Bangalore or Boston.”

In is rebuttal, Professor Bhagwati states, “Compelling an American MNC to retain a strong presence in America would be the wrong prescription no matter which of the two rationales you accept…Forcing them to produce at home when that makes them uncompetitive in world markets is surely the wrong prescription: it makes them uncompetitive in markets which today are fiercely competitive.

While I realize and have written about the fact that American manufacturers are under a disadvantage in dealing with countries like China that practice “predatory mercantilism,” it is my opinion that American multinational and national manufacturing corporations have more than a “duty to maintain a strong presence in their home countries.” As American citizens, we “pledge allegiance to the Flag of the United States of America, and to the Republic for which it stands, one Nation under God, indivisible, with liberty and justice for all.” Thus, we owe “allegiance” to our country, which is defined as “the loyalty of a citizen to his or her government.” Other synonyms are:  fidelity, faithfulness, adherence, and devotion.

Obviously, if you are a loyal, faithful, devoted citizen of the United States this means that you take actions in your personal and business life to support your country and do not purposely take actions that may cause harm to your country. Moving a majority of manufacturing to other countries, especially China is doing harm to your country since China has a written plan to replace the United States as the world’s super power. Therefore, American multinational corporations and other American manufacturers owe allegiance to the United States of America by maintaining a strong presence in our country.

 

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ITIF Report Details 50 Policies to Improve U.S. Manufacturing Competitiveness

Tuesday, September 25th, 2012

Last week, the Information Technology and Innovation Foundation (ITIF) released a report titled, “Fifty Ways to Leave Your Competitiveness Woes Behind: A National Traded Sector Competitiveness Strategy,” by Stephen Ezell and Robert Atkinson in which they stated, “A comprehensive strategy aimed at strengthening U.S. establishments competing in global markets is needed for the United States to boost short-term recovery and long-term prosperity…”

“The United States is increasingly isolated in its belief that countries don’t compete with one another and that only firms compete” said ITIF Senior Analyst Stephen Ezell, co-author of the report. “Our traded sector establishments are up against competitors that are aided in countless ways by their governments. It’s time to level the playing field.”

The report, presents 50 federal-level policy recommendations to help restore U.S. traded sector competitiveness, along with 13 state-level recommendations. The recommendations are organized around federal policies regarding the “4Ts” of technology, tax, trade, and talent, as well as policies to increase access to capital, reform regulations, and better assess U.S. traded sector competitiveness.

A nation’s traded sector includes industries such as manufacturing, software, engineering and design services, music, movies, video games, farming, and mining, which compete in international marketplaces and whose output is sold at least in part to nonresidents of the nation. They are the core engine of U.S. economic growth and face unique challenges.

Because these industries face competition in the global market that non-traded, local-serving industries (retail trade or personal services) do not, their success is riskier. “The health of U.S. traded sector enterprises in industries such as semiconductors, software, machine tools, or automobiles—all far more exposed to global competition than local-serving firms and industries—cannot be taken for granted.”

If a company like Boeing loses market share to Airbus, thousands of domestic jobs at Boeing, its suppliers, and the companies at which their employees spend money will be lost. In contrast, a local grocery store may compete for business with other supermarkets, but it is not threatened by international competition. If Safeway loses market share to Wal-Mart, the jobs remain in the United States.

Ezell and Atkinson state, “The fact that the U.S. traded sector has not created a single net new job in 20 years is a core reason for the current U.S. economic malaise.” They cite the research of Nobel Prize-winning economist Michael Spence, who has demonstrated that “from 1990 until the Great Recession started in 2007, the U.S. achieved virtually no growth in traded sector jobs. The malaise has been a downright decline in manufacturing, as the United States lost nearly one-third of its manufacturing workforce in the previous decade, saw on net over 66,000 manufacturing establishments close, accrued a trade deficit in manufactured products of over $4 trillion, and experienced a decline in manufacturing output of 11 percent at a time when U.S. GDP increased by 11 percent (when measured properly).”

Ezell and Atkinson corroborate what I have written previously ? “every lost manufacturing job has meant the loss of an additional two to three jobs throughout the rest of the economy. The 32 percent loss of manufacturing jobs was a central cause of the country’s anemic overall job performance during the previous decade, when the U.S. economy produced, on net, no new jobs….at the rate of growth in manufacturing jobs that occurred in 2011, it would take until at least 2020 for employment to return to where the economy was in terms of manufacturing jobs at the end of 2007.”

The reasons why the authors emphasize the importance of manufacturing as a “traded sector” are:

  • It will be difficult for the U. S. to balance its foreign trade without a robust manufacturing sector because manufacturing accounts for 86 percent of U.S. goods exports and 60 percent of total U.S. exports.
  • Manufacturing remains a key source of jobs that both pay well.
  • Each manufacturing job supports as an average of 2.9 other jobs in the economy.
  • The average wages in U.S. high technology are 86 percent higher than the average of other private sector wages.
  • Manufacturing, R&D, and innovation go hand-in-hand.
  • The manufacturing sector accounts for 72 percent of all private sector R&D spending.
  • Manufacturing employs 63 percent of domestic scientists and engineers.
  • U.S. manufacturing firms demonstrate almost three times the rate of innovation as U.S. services firms.
  • Manufacturing is vital to U.S. national security and defense.

They contend that “the engines of a nation’s competitiveness are in fact not mom and pop small businesses, but rather firms in traded sectors, high-growth entrepreneurial companies, and U.S.-headquartered multinational corporations. Although such firms comprise far less than 1 percent of U.S. companies, they account for about 19 percent of private-sector jobs, 25 percent of private-sector wages, 48 percent of goods exports, and 74 percent of nonpublic R&D investment. And, since 1990, they have been responsible for 41 percent of the nation’s increase in private labor productivity.”

The report notes that “traded sector businesses improve the local economy in three ways:

  1. Traded sector businesses bring money into a region by selling to people and businesses outside the region.
  2. They help keep local money at home through import substitution, which occurs when local residents and businesses purchase locally produced products instead of importing goods and services.
  3. They improve economic equity since “their productivity and market size tends to lead them to offer higher wage levels” and “jobs at traded sector companies help anchor a region’s middle class employment base by providing stable, living wage jobs for residents.”

While the authors believe all 50 recommendations are needed, they believe the 10 most critical recommendations are:

  1. Create a network of 25 “Engineering and Manufacturing Institutes” performing applied R&D across a range of advanced technologies.
  2. Support the designation of at least 20 U.S. “manufacturing universities.”
  3. Increase funding for the Manufacturing Extension Partnership (MEP).
  4. Increase R&D tax credit generosity and make the R&D tax credit permanent.
  5. Institute an investment tax credit on purchases of new capital equipment and software.
  6. Develop a national trade strategy and increase funding for U.S. trade policymaking and enforcement agencies.
  7. Fully fund a nationwide manufacturing skills standards initiative.
  8. Expand high-skill immigration, particularly which focuses on the traded sector.
  9. Transform Fannie Mae into an industrial bank.
  10. Require the Office of Information and Regulatory Affairs (OIRA) to incorporate a “competitiveness screen” in its review of federal regulations.

Only two of their top 10 recommendations made the list of the most critical recommendations in the second edition of my book:  # 4 and # 10. However, I support all of their other top 10 recommendations, as well as many of their other 40 recommendations, especially the following:

  • Lower the effective U. S. corporate tax rate – As of April 1, 2012 (when Japan lowered its corporate tax rate), the United States took the mantle of having the highest statutory corporate tax rate at almost 39 percent (when state and federal rates are combined) of any OECD nation.
  • Combat foreign currency manipulation
  • Better support and align trade promotion programs to boost U. S. exports.
  • Better promote reshoring.

I also support their recommendation that Congress should broaden the R&D tax credit’s scope to make it clear that process R&D (R&D to develop better ways of making things) qualifies for the tax incentive and that Congress should expand the R&D credit to allow expenditures on employee training to count as qualified expenditures.

With regard to trade enforcement, they recommend that the U. S. “exclude mercantilist countries from the Generalized System of Preferences (GSP)” because “the top 20 GSP-beneficiary countries — Argentina, Brazil, Bolivia, Colombia, India, Indonesia, Pakistan, the Philippines, Russia, Thailand, Turkey, and Venezuela—are on the U.S. Trade Representative’s Special 301 Watch List (which documents countries that fail to adequately protect U.S. companies’ or individuals’ intellectual property rights).”

I believe that enacting legislation to address foreign currency manipulation by China in particular should be in their top 10 recommendations. I also recommend that we enact legislation to establish either a Natural Strategic Tariff as recommended by economist Ian Fletcher in his book Free Trade Doesn’t Work:  What Should Replace It and Why, or a Balanced Trade Restoration Act to authorize sale of Import Certificates using either the Warren Buffet plan or the Richmans plan (as explained in their book Trading Away our Future).

I completely disagree with their recommendation to “Forge new trade agreements, including a high-standard Trans-Pacific Partnership and Trans-Atlantic Partnership.” As documented by Alan Uke in his book, Buying Back America, the U. S. has a trade deficit with nearly every single one of the countries with which it has a trade agreement. In fact, the U. S. has a trade deficit with 66 countries, the most egregious being the $278 billion deficit with China. Remember the touted benefits of NAFTA with Canada and Mexico? Well, in 2010, we had a trade deficit with Canada of $28 billion and $66 billion with Mexico. Do we want to increase our current trade deficit by adding more trading partners?

Additionally, the report articulates four key themes that the authors believe should be viewed as essential components of a U.S. traded sector competitiveness strategy. They recommend that the following key themes must be embraced by U.S. policymakers if the United States is to restore its traded sector competitiveness (summarized):

  1. The federal government must place strategic focus on its traded sectors, because it simply can’t rely entirely on its non-traded sectors to sustainably power the U.S. economy.
  2. The United States needs become much more of an engineering economy because gains from engineering-based innovation are capturable and appropriable within nations.
  3. The United States must move toward an economic system more focused on production than consumption, giving short-term consumption less priority in our politics.
  4. The structure of the global trading system must be seriously restructured to ensure that it is a trading system based on market-oriented principles and not the “innovation mercantilism” that has risen in the last decade, which fundamentally hurts the U.S. competitive position while violating the spirit and often the letter of the World Trade Organization.

Beyond federal policies to support traded sector competitiveness as a nation, the report also includes a section on recommended policies that states should implement to bolster their competitiveness, and in turn, the competitiveness of the broader U.S. economy. The state policy recommendations utilize the same “4Ts” framework as the federal recommendations.

Ezell and Atkinson state, “Implementing the policies recommended in this report will make the United States a more attractive investment environment for traded sector enterprises and their establishments. The technology policies will help spur innovation in advanced manufacturing, upgrade the technology capacity of manufacturing and other traded sector firms, help restore America’s industrial commons, and support the productivity, innovation, and competitiveness of traded sector SMEs. The tax policies will stimulate a favorable climate for private sector investment by making the overall U.S. corporate tax code more competitive with that of other nations and also by leveraging tax policy to incent private sector R&D and investment.”

In conclusion, they urge that U.S. policymakers understand that “manufacturing is not some low-value-added industry to be cavalierly abandoned.” Manufacturing is vital to U.S. competitiveness. I highly recommend reading all of this comprehensive, well-researched, well-documented report to be able to evaluate all of their recommendations and benefit from the details that are the basis for each recommendation.

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Posted in Economy, Manufacturing, National security, Outsourcing, Reshoring, Taxes/Regulations, Trade | No Comments »

“Reshoring” Opportunities Abound at Del Mar Electronics & Design Show

Tuesday, April 24th, 2012

If your company is considering ”reshoring” manufacturing of some parts, assemblies, or products to the U. S., then you should attend the 18th annual Del Mar Electronics & Design Show, which will be held at the Del Mar Fairgrounds (Map) Wednesday May 2nd, 10am – 5pm and Thursday May 3rd 10am – 3pm.  Admission to the show, the seminars, and parking at the show are ALL FREE.

This is the only industrial trade show for manufacturers held annually in the San Diego region so this is the best opportunity for companies to find local and regional suppliers to “reshore” manufacturing to the U. S.

To help your company analyze the true Total Cost of Ownership to determine whether or not you should be returning manufacturing to America, I will be giving a presentation on “Returning Manufacturing to America” at 10 AM on Wednesday May 2nd.    I will be considering:

  • Hidden costs of doing business offshore that comprise a true understanding of the “Total Cost of Ownership”
  • How you can calculate these costs utilizing the Total Cost of Ownership worksheet calculator developed by Harry Moser of the Reshoring Initiative
  • Case stories reviewing some of the problems companies have experienced in outsourcing offshore
  • Reasons why some companies are choosing to “reshore” manufacturing to the U.S.

For the past 15 years, manufacturers have outsourced their manufacturing offshore in Asia, especially in China, to reduce costs to keep or increase market share.  However, the supply chain dynamics are changing, and the cost savings of outsourcing to China are eroding due to higher labor rates and shipping costs.  In the last few years, there have also been many news reports about outsourcing horror stories regarding poison or tainted Chinese products, Chinese counterfeit parts, intellectual property infringement, quality problems, and lawsuits so many companies are rethinking their decision about manufacturing in China.

In August 2011, the Boston Consulting Group’s released their first report “Made in America, Again: Why Manufacturing Will Return to the U.S.,” explaining how rising wages and other forces are steadily eroding China’s once-overwhelming cost advantage as an export platform for North America.  By around 2015, BCG concluded that when higher U.S. worker productivity, supply chain and logistical advantages, and other factors are taken fully into account, it may start to be more economical to manufacture many goods in the U.S.

Now, a new BCG report, “U.S. Manufacturing Nears the Tipping Point, Which Industries, Why, and How Much?” released on March 22, 2012 by Harold L. Sirkin, Michael Zinser, Douglas Hohner, and Justin Rose has identified “seven industry groups that account for $200 billion in goods imported from China for which rising costs in China will likely prompt manufacturing of goods consumed in the U.S. to return to the U.S.”

The report predicts that production of 10 to 30 percent of U.S. imports from China in these industries, which account for approximately 70 percent of goods that the U.S. imports from that nation, could shift to the U.S. before the end of the decade, adding $20 billion to $55 billion in output annually to the domestic economy.”  The tipping-point sectors are transportation goods, appliances and electrical equipment, furniture, plastic and rubber products, machinery, fabricated metal products, and computers and electronics.

BCG predicts that improved U.S. competitiveness and rising costs in China will put the U.S. in a strong position to add 2 million to 3 million jobs in a range of industries and an estimated $100 billion in annual output by the end of the decade which would reduce unemployment by 1.5 to 2 percentage points, and lower the nonoil-related merchandise deficit by 25 to 35 percent.

According to a new survey which BCG conducted in late February, “More than a third of U.S.-based manufacturing executives at companies with sales greater than $1 billion are planning to bring back production to the United States from China or are considering it.”

The top factors cited as driving future decisions on production locations:  labor costs (57 percent), product quality (41 percent), ease of doing business (29 percent), and proximity to customers (28 percent).  In addition, 92 percent said they believe that labor costs in China “will continue to escalate,” and 70 percent agreed that “sourcing in China is more costly than it looks on paper.”

In the new survey, “67 percent of respondents in rubber and plastic products, 42 percent in machinery, 41 percent in electronics, 40 percent in computers, and 35 percent in fabricated metal products said they expect that their companies will reshore production from China to the U.S.”

“Not long ago, many companies regarded China as the low-cost default option for manufacturing,” observed Michael Zinser, a BCG partner who leads the firm’s manufacturing work in the Americas. “This survey shows that companies are coming to the conclusion surprisingly fast that the U.S. is becoming more competitive when the total costs of manufacturing are accounted for.”  To request a summary of the survey findings, please contact David Fondiller at fondiller.david@bcg.com.

The Del Mar show will also feature a number of other free technical seminars.  A few of the topics are:  “Using LinkedIn as a Business Development Tool,” “New Energy Storage Options for the Transportation Sector,” “Best of SolidWorks Tips and Tricks,” and “Counterfeit Electronic Components Are No Longer a Threat; They are a Reality.”  For the full seminar schedule, go to www.vts.com.  In addition, all attendees are invited to the Post Time Party, Wednesday, May 2nd, from 5 – 7pm, with free refreshments provided thanks to sponsorship by Quality Systems Integrated Systems, Luscombe Engineering, Concisys Electronic Manufacturing Services, and National Test Equipment.

My company will be exhibiting products for the companies we represent at Booths 207 – 209 in the Bing Crosby Hall, which is to the left of the main entrance to the show.   We look forward to seeing you at the show!

 

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Will the AME, NAM and NACFAM Alliance Revitalize Manufacturing?

Tuesday, March 6th, 2012

The Association for Manufacturing Excellence (AME) is joining with leading organizations, such as the National Association of Manufacturers (NAM), and the National Council For Advanced Manufacturing (NACFAM) to form an alliance to revitalize manufacturing and grow the economy, while improving the standard of living of all citizens in North America.  These organizations are inviting public and private sectors to come together to build on the NAM study, A Manufacturing Renaissance: Four Goals for Economic Growth.

The AME white paper “Challenges Facing the Manufacturing Industry…” states “The strategy calls for putting people, schools, businesses and the government to work; producing literate career-ready citizens capable of joining the workforce; and enabling manufacturers to once again lead the designing, building and exporting of quality products and services around the globe.” The top three priorities are:

  • Build a better educated and trained workforce
  • Promote product and process innovation, as well as research and development
  • Improve global competitiveness for companies

AME advocates that each priority “must be considered in developing public policies that support the revitalization of the manufacturing sector, and policy-makers must consider these elements in shaping future public policy and legislation.”   The goal is to help companies and our education systems transform themselves by using more innovative processes to become more competitive to put people back to work in making things in America.

I  strongly agree with AME’s viewpoint that we need to revitalize American manufacturing because “manufacturing is very critical to economic growth, prosperity and a higher standard of living.”  This is because manufacturing jobs have a multiplier effect-? every manufacturing job creates three to four other jobs.  Manufacturing creates more wealth than any other sector in the economy.  “Manufacturing pays higher wages and provides greater benefits, on average, than other industries. It performs almost two-thirds of private sector research and development, creates the highest number of jobs to support the industry while serving the surrounding communities, and contributes to more than 50 percent of the country’s total exports.”

The White Paper notes that we’ve lost nearly six million manufacturing jobs in the United States since January 2000, for an average of about 54,000 per month, according to the Bureau of Labor Statistics.  We also lost 56,190 manufacturing facilities from 2001 to 2010, or about 15 per day.

AME has issued a call for action to policy-makers, industry professionals and academic leaders to play critical roles in revitalizing the economy through the rebirth of manufacturing jobs.  To do this, we need to ensure the supply of educated citizens, necessary physical infrastructure, and a favorable tax and regulatory framework that fosters increased collaboration between public and private sector partners.

AME has been leading the “Revitalization of Manufacturing” initiative, wherein AME and their allied organizations have been reaching out to policy-makers nationwide, and encouraging them to join or develop efforts focusing on local and state job creation.  AME states that “itt is imperative that policy-makers recognize the importance of an industry that has been the backbone of the North American economy.  To date, AME has received more than 400 signatures of support from state and federal policy-makers, industry trade associations and operations executives representing manufacturers across North America.”

AME advocates “a renewed emphasis on making businesses more competitive by developing the educational and training infrastructure to produce qualified individuals to fill these new opportunities.”   To accomplish these initiatives, AME is joining with leading organizations to adopt the three priorities by:

Reforming public education to produce career ready citizens – Parents, teachers and business leaders need to recognize that other nations are both out-educating us and out-competing us.  Some of the ongoing initiatives by manufacturing organizations to help reform public education are:

  • The Manufacturing Institute’s Roadmap to Education Reform for Manufacturing, a comprehensive blueprint for education reform
  • American Productivity and Quality Center’s (APQC) Education North Star program that helps school districts do more with less by transforming education through process and performance management
  • Career Pathways,  a program that encourages students to consider a career in manufacturing and help prepare them by using the Manufacturing Pathway Map

Last fall, I wrote about a number of programs sponsored by other organizations to interest and prepare youth for careers in manufacturing in the article, “How Can we Attract Youth to Manufacturing Careers?”

Establishing consortiums of like-minded individuals with the same mission to help sustain and grow businesses through sharing technology and innovative ideas.  AME recommends that businesses “grow a culture that achieves results through engaging their people” to “develop pragmatic, working-level leaders who can pull it all together.”  In addition, businesses “need to foster rapid advancement of technology and innovation by establishing regional consortiums to help bring jobs back home.”

“AME Northern Kentucky/Cincinnati Consortium is the first building block of the AME Consortia network, and the organizations plans to deploy at least 10 more in 2012.  AME also has alliance partners, like the Virginia Business Excellence Consortium.”

Reshoring by making better informed business decisions  to keep and bring jobs back home – the Reshoring Initiative was founded by Harry Moser in 2010.  He is collaborating with AME to promote reshoring as part of the “Revitalization of Manufacturing” initiative.  AME recommends that companies use the Total Cost of Ownership (TCO) analysis tool Mr. Moser developed “to effectively compare total cost of local and offshore sources, enabling them to make informed business decisions. ‘We are committed to changing the sourcing paradigm from ‘off-shored is cheaper’ to ‘local reduces the total cost of ownership,’ said Moser.”

Redeploying Training Within Industry (TWI) programs to train or retrain workers to have the skills to work in advanced manufacturing jobs to revitalize manufacturing and re-energize the economy.  First created during WWII to replace workers who left the factories and went off to war, the TWI programs were revived in 2001 by the Central New York Technology Development Organization, a member of the U.S. Manufacturers Extension Partnership (MEP), after which the TWI Institute was formed to oversee the global deployment of the program.

AME’s White Paper only identifies the TWI programs, but I wrote about training programs sponsored by other organizations, such as the Society of Manufacturing Engineers’ Tooling U and The Fabricators and Manufacturers Association, International in my article, ”What’s Being Done to Address the Lack of Skilled Workers?

In order to be more globally competitive, AME recommends that companies use Lean Certification, an internationally recognized certification process developed by the Society of Manufacturing Engineers (SME), AME, Shingo Prize, and the American Society for Quality (ASQ), which establishes the standard for continuous improvement and Lean practices.

The White Paper states that at its 2012 national board meeting, “AME reaffirmed its commitment to helping small-and medium-sized businesses create more manufacturing jobs, and the organization’s strategic plans address the challenges facing manufacturing by formulating counter-measurements to address them with its public and private alliance partners.”

In conclusion, the White Paper states, …the public and private sectors must come together to build an integrated plan supportive of these initiatives, especially NAM’s Manufacturing Strategy for Jobs and Competitiveness and Roadmap to Education Reform for Manufacturing; the LEARN Act; and the Reshoring Initiative.  These will ultimately revitalize the industry and grow the economy.”

I have repeatedly said in my book and blog articles that it will take the efforts of the public and private sectors, as well as individual Americans, to first save and then revitalize American manufacturing.  I agree that these strategies will be beneficial, but they will not be enough to accomplish this goal.   First of all, I do not agree that the challenges to accomplish this goal are the “four major challenges on which its future depends and has been failing to meet… globalization, the revolution in information technology, the nation’s chronic deficits and its pattern of energy consumption” that are quoted from Thomas L. Friedman and Michael Mandelbaum’s book, That Used to Be Us, How America Fell Behind in the World It Invented and How We Can Come Back.

These are all realities that must be addressed, but they are not the main challenges that face America’s manufacturing industry.  The main challenge can be summed up in one word:  China.  By this I mean China’s predatory mercantilism in the form of currency manipulation, export subsidies, theft of intellectual property, product “dumping,” export restrictions on raw materials, and more recently, technology transfer and rare earth hoarding.

As long as companies that are members of AME, NAM, and NACFAM, such as Westinghouse, General Electric, and Caterpillar, choose to close factories in the United States to offshore manufacturing to China for the illusion of selling to the 1.3 billion Chinese consumers, we will continue to lose manufacturing jobs.

As long as these organizations and their member companies advocate so-called free trade policies and are afraid to stand up to China’s predatory mercantilism and urge our elected officials to demand that China adhere to the terms of its admission into the World Trade Organization, our huge trade deficits will continue to escalate.

These companies must stop being Chinese apologists and appeasers just to add more profit to their bottom line.  They need to realize that complying with China’s demand for technology transfer in order to build or establish a plant in China is destroying the future of their own companies.

Now is the time for action.  The best thing that AME, NAM and NACFAM members could do is to take a pledge to not close any more plants in the U. S. to set up manufacturing in China.  Then, we would really be able to revitalize American Manufacturing.

 

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What Could We Do Right Now to Create Jobs?

Tuesday, January 17th, 2012

There are numerous ideas and recommendations on how we could create jobs that range from the cautious to the extreme.  Most job creation programs proposed by commentators, politicians, and economists involve either increased government spending or reductions in income or employment taxes at a time of soaring budget deficits and decreased government revenue.  Other recommendations would require legislation to change policies on taxation, regulation, or trade that would be difficult to accomplish. Many of these solutions involve borrowing money or taking money from one group of citizens or a future generation to give to another.  Let’s start with what we as individuals can do from the viewpoint of entrepreneurs, business owners, employees, and consumers.

If you are an entrepreneur starting a company, find a niche product for which customers will be willing to pay more for a “Made in USA” product.   Plan to sell your product on the basis of its “distinct competitive advantage” rather than on the basis of lowest price.  Select your suppliers from American companies as this will create jobs for other Americans.

If you are the owner of an existing manufacturing company, then you could do a Total Cost of Ownership analysis for component parts that you are having made offshore to see if you could “reshore” some of all of them to be made in the United States.  Check out www.reshorenow.org for a TCO worksheet estimator to conduct your analysis.  Also, you could choose to keep R&D in the United States or bring it back to the United States if you have “offshored” it.    Every manufacturing job you keep or bring back to the United States will create an average of three to four support jobs for other Americans.  If you are a service company, you could choose to keep your customer service department in the United States or bring it back if it is “offshored.”  If enough manufacturing is “reshored” from China, we would drastically reduce our trade  $600 billion trade deficit .  We could create as many as three million manufacturing jobs, which would, in turn, create 9 – 12 million total jobs, bringing our unemployment down to 4 percent.

If you are an inventor ready to get a patent or license agreement for your product, select American companies to make parts and assemblies for your product as much as possible.  There are some electronic components that are no longer made in the U. S., so it may not be possible to source all of the component parts with American companies.  As I’ve written previously, there are many hidden costs to doing business offshore so that in the long run you may not save as much money as you expect by sourcing your product offshore.  Don’t forget about the danger of having your Intellectual Property stolen by a foreign company that will use it to make a copy-cat or counterfeit product sold at a lower price than your product.

If you are fortunate enough to have a regular, stable job, do everything in your power to contribute to the success of your company.  Do your job to the best of your ability.  Be willing to learn new job skills to increase your value to your employer.  No matter what your job, adopt the marketing mindset where you realize that everyone in a company is part of the marketing team regardless of their job function.  Every interaction that a customer or potential customer has with anyone in a company influences his or her opinion about doing business with that company.  Even though you are being paid by your employer, it’s actually your company’s customers that provide you with a job.

You may not realize it, but you have tremendous power as a consumer.  Even large corporations pay attention to trends in consumer buying, and there is beginning to be a trend to buy ‘Made in USA” products.  Pay attention to the country of origin labels when you shop and buy “Made in USA” products whenever possible.  Be willing to step out of your comfort zone and ask the store owner or manager to carry more “Made in USA” products.   If you buy products online, there are now a plethora of online sources dedicated to selling only “Made in USA” products.   Each time you choose to buy an American-made product, you help save or create an American job.  There is a ripple effect in that every manufacturing job creates three to ten other manufacturing jobs, depending on the industry.  If 200 million Americans bought $20 worth of American products instead of Chinese, it would reduce our trade imbalance with China by four billion dollars.  During the ABC World News series called “Made in America,” Diane Sawyer has repeatedly said, “If every American spent an extra $3.33 on U. S.-made goods, it would create almost 10,000 new jobs in this country.”

Now, let’s consider what Congress could do to create jobs.  First, Congress must enact legislation that addresses China’s currency manipulation.  Most economists believe that China’s currency is undervalued by 30-40% so their products may be cheaper than American products on that basis alone.  To address China’s currency manipulation and provide a means for American companies to petition for countervailing duties, the Senate passed S. 1619 last fall.  Even though the corresponding bill in the House, H. R. 639, had bi-partisan support with 231 co-sponsors, GOP leadership bottled up the bill in committee and prevented it from being brought up for a vote, so the session ended without action to address this serious issue.  The 112th Congress lasts two years, starting in Jan 2011 and ending December 2012, so there is the opportunity for the bill to be voted on this year.

We  voters need to pressure our elected representatives in the House to pass this bill this year so that American products can compete against Chinese imports.  It’s an obvious fact that if American companies can increase sales of their products, then they will be able to hire more workers.

Second, Congress should pass legislation allowing American corporations to “repatriate” income earned by plants in foreign countries at a reduced tax rate of 5-5.5% if the income is permanently reinvested in the United States.  This would bring nearly 1.2 billion dollars of monies back to the U. S. to be invested in R&D, plants, equipment, and hiring workers.

Third, Congress should strengthen and tighten procurement regulations to enforce “buying American” for all government agencies and not just the Department of Defense.   All federal spending should have “buy America provisions giving American workers and businesses the first opportunity at procurement contracts.  New federal loan guarantees for energy projects should require the utilization of domestic supply chains for construction.  No federal, state, or local government dollars should be spent buying materials, equipment, supplies, and workers from China.

My other recommendations for creating jobs are based on improving the competitiveness of American companies by improving the business climate of the United States so that there is less incentive for American manufacturing companies to outsource manufacturing offshore or build plants in foreign countries.  The proposed legislation would also close tax loopholes and prevent corporations from avoiding paying corporate income taxes.  They are:

  • Reduce corporate taxes to 25 percent
  • No negotiation or ratification by Congress of any new Free Trade Agreements
  • Make capital gains tax of 15 percent permanent
  • Increase and make permanent the R&D tax credit
  • Eliminate the estate tax (also called the Death Tax)
  • Improve intellectual property rights protection and increase criminal prosecution
  • Prevent sale of strategic U.S.-owned companies to foreign-owned companies
  • Enact legislation to prevent corporations from avoiding the U.S. income tax by reincorporating in a foreign country
  • Change the tax code to a “partial exemption system” to eliminate incentives for companies to move offshore by taxing all corporate income at a reasonable rate once

In this election year, it is unlikely that legislation proposing any of these recommendations would have a chance of being passed by Congress.  The problem is that no Democrat would want to allow any credit to go to a Republican, which might help them win re-election, and no Republican would want to allow any credit to go to a Democrat, which might help them win re-election.   We will need to wait until after the 2012 election before we have any hope of such legislation being considered.

Finally, the Obama administration is considering a high-level task force to manage China trade enforcement issues. Such a task force is desperately needed and long overdue.  The challenge will be to ensure that the task force has the authority to take bold steps to lower our trade deficit with China.  Holding China accountable for their compliance with terms of their membership in the World Trade Organization would be a major step in helping American manufacturers compete in the global marketplace to be able to succeed, grow and create jobs in America instead of China.

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Trends that are Changing the Future

Tuesday, December 6th, 2011

A trend is a pattern of gradual change in a condition, output, or process that moves in a certain direction over time.  There are many trends that have occurred this year, but some are changing the way we work and conduct business.   We will take a look at just a few of them that are beginning to have an impact and could dramatically impact our lies if they continue in the future.

Biomimicry:  Humans have always looked to nature for inspiration to solve problems. One of the early examples of biomimicry was the study of birds to enable human flight.  The Wright Brothers, who created and flew the first airplane in 1903, derived inspiration for their airplane from observations of pigeons in flight.

The term biomimicry was popularized by scientist and author Janine Benyus in her 1997 book Biomimicry: Innovation Inspired by Nature. Biomimicry is defined in her book as a “new science that studies nature’s models and then imitates or takes inspiration from these designs and processes to solve human problems”.  Today, biomimicry is changing the way we research, invent, design, develop, and manufacture products.

The San Diego Zoo started its biomimicry programs in 2007, and the Zoological Society of San Diego recently partnered with Point Loma Nazarene University on an economic impact report looking into the feasibility of bringing another spoke into the region’s burgeoning green economy.  The report titled Biomimicry: An Economic Game Changer and estimated that biomimicry would have a $300 billion annual impact on the US economy, plus add an additional $50 billion in environmental remediation.

“The completed report articulates a compelling case for making the San Diego region a global biomimicry hub,” said Randy M. Ataide, executive director of the Fermanian Business & Economic Institute at Point Loma Nazarene University.  “Biomimicry could represent a revolutionary change in our economy by transforming many of the ways we think about designing, producing, transporting and distributing goods and services.”

An informal alliance to transform an esoteric concept into what they hope is the beginning of a future industry cluster has formed the Biomimicry Bridge (Business, Research, Innovation, Development, Governance and Education).  A memorandum of understanding to facilitate growth of the Bridge organization has been in place since 2008 between the San Diego Zoo, the City of San Diego, CONNECT, UC San Diego, San Diego State University, Point Loma Nazarene University, and the University of San Diego.

“The key to biomimicry is the value we place on natural systems and species,” said Paula Brock, chief financial officer for the San Diego Zoo. “Biomimicry offers an opportunity to bring successful economics together with conservation. We hope this study will inspire new companies and entrepreneurs to focus upon the development of this field.”

A key finding of the report is that biomimicry holds the potential to attract sizable capital inflows, driven by the prospects of rapid growth and high rates of return, and that venture capital potentially could flow into the field at a pace at least equal to that of biotech, estimated to be about $4.5 billion in the U.S. in 2010.

The San Diego Zoo and San Diego Zoo Safari Park house nearly 8,000 animals representing 840 species, and the San Diego Zoo’s accredited botanical garden has close to 40,000 species.  Allison Alberts, chief conservation and research officer for the San Diego Zoo, said “We are poised to offer the opportunity to be a living laboratory in helping biomimicry-based businesses grow.”  She added that the inspiration that comes from studying animals and plants could also be a revenue generator for the zoo. The study determined that the zoo is the only facilities-based provider of biomimicry services in the world and a natural to drive research and commercial applications.

A range of businesses in the region already are incorporating aspects of biomimicry in the design of products or ones they have on the drawing boards, said Ruprecht von Buttlar, director of finance and commercialization programs at CONECT, which serves as a networking group for investors, entrepreneurs and high-tech and life sciences professionals.

The San Diego Zoo’s Biomimicry website features a page on the latest news, research, and development of biomimetic products, a few of which are:

GreenShield: An environmentally friendly stain-resistant fabric finish inspired by lotus leaves:

Mirasol®, a display innovation by Qualcomm, mimics the microstructure of a butterfly’s wing to generate color without pigment in their handheld display technologies:

Biomatrica has developed DNA and RNA preservation technology based on the process in nature called anhydrobiosis:

Columbia Forest Products developed PureBond by manipulating soy proteins to behave like mussel byssal threads. Is the only urea-formeldehyde (carcinogen) free plywood glue on the market:

Cloud Computing: Cloud computing has become one of the hottest buzzwords in technology and  its birth as a term can be traced “to 2006, when large companies such as Google and Amazon began using ‘cloud computing’ to describe the new paradigm in which people are increasingly accessing software, computer power, and files over the Web instead of on their desktops.  It is an expansion of what has been known as software as a service (SaaS) in which cloud computing providers deliver applications via the internet that are accessed from web browsers and desktop and mobile apps, while the business software and data are stored on servers at a remote location.

This type of data center environment allows companies to get their applications up and running faster, with easier manageability and less maintenance, and enables IT to more rapidly adjust IT resources (such as servers, storage, and networking) to meet fluctuating and unpredictable business demand.

Cloud computing is all the rage. “It’s become the phrase du jour,” says Gartner senior analyst Ben Pring, echoing many of his peers. The problem is that (as with Web 2.0) everyone seems to have a different definition.

On the Hyland blog, Glenn Gibson offers a simpler definition:  “The Cloud” is a term used to describe a wide range of technologies, which are accessible through high-speed connections to the internet and private networks.

Cloud computing is at an early stage, with a growing number of providers large and small delivering a variety of cloud-based services, from full-blown applications to storage services to spam filtering.  Today, for the most part, IT must plug into cloud-based services individually, but cloud computing aggregators and integrators are already emerging.

Cloud computing is a long-running trend with a far-out horizon.  This year, TechAmerica San Diego added the new category of SaaS/Cloud for the first time at the 2011 High Tech Awards held on October 28th.    Four companies were finalists, and the winner, ServiceNow develops and delivers a comprehensive suite of cloud-based services for enterprise IT management. For a single low subscription price, ServiceNow customers have access to nearly 20 native applications built on a common, extensible platform. ServiceNow supports all common ITIL processes including incident, problem, change, request fulfillment, service level management and others.  The three other finalists were:  Kyriba, Syntricity Inc., and The Active Network.

Cloud computing is also changing the way manufacturing companies can become ISO Certified at a price affordable for companies as small as less than 25 employees and under $1.5 million in sales.   ION Quality Systems provides an innovative Quality Management System designed to revolutionize businesses. Their customizable management tools, experience, and exemplary customer service make them a partner in quality assurance. They can prepare you to get your AS9100, ISO 9001:2008 or other certification more efficiently, economically, and effectively than a traditional quality system in as little as 90 days.

However, there are concerns about the cyber security of cloud computing, and the June issue of National Defense magazine featured an article on “Cloud Computing Trend Sparks Compliance Concerns.”   Because the Obama administration has focused on cloud computing for future information technology needs, there is concern that “data stored in the cloud must always be accessible from any location, thereby increasing hacker vulnerability and the need ? without degrading fast encryption and decryption ? for robust measures to deflect security breaches.” This same cyber security concern was the focus of a symposium on “CLOUD.GOV?

The Promise, Limits, and Reality” held by the San Diego chapter of the National Defense Industry Association on October 11-13, 2011.

Social Media:  Social networking is not new; social networks have been around for far longer than people have been online. Everyone has belonged to social networks, and they still participate in social networks whether they know it or not.  What is new is social media that provides online social networking.  In addition to the more popular, Facebook, LinkedIn, and Twitter, there are Foursquare, Yelp, Groupon, and Living Social.   The BLÜ Group – Advertising & Marketing has published a free social media guide to help businesses of all sizes, particularly small and mid-sized businesses, connect with customers and potential customers, stay engaged with them, and ultimately grow their bottom line.

LinkedIn, Facebook and Twitter:  Most of us have been adding to our social media network to expand business opportunities, express opinions, and keep connected with people who change from one job to another.  Now, it is literally changing the way people conduct business, and view customers’ opinions and product ideas.  .

In the September 2011 issue of Industry Week, the article “Fueling Auto R&D with Social Media,” reported that Kia Motors Corporation  “decided to modify the seat design for their 2012 Optima as a result of a groundswell of complaints from consumers and automotive writers percolating on the Internet.”  Kia uses business intelligence software to monitor online comments about it vehicles and determined that it was bigger problem than they realized and needed to be fixed before the next major change in the model in a few years.

Ford also pays close attention to what people say about its products on social media such as Facebook and Twitter, and elsewhere on the internet.  Nissan Motor Company is also trying to grow it fan base on social media sites such as Facebook and Twitter to leverage the maximum impact when it launches new models.  Nissan is also using social media as a research tool.  In August 2011, Nissan invited its more than 300,000 Facebook fans to suggest names for a new optional interior package for the Nissan Cube.  Eric Marx of Nissan said using social media to make ”real business decisions it absolutely the future. “  A cottage industry is emerging to aggregate the vast amount of online comments into actionable data.  Nielsen Online’s BuzzMetrics software promises to deliver consumer insights and real-time market intelligence, and WiseWindow’s MOBI (Mass Opinion Business Intelligence) software to predict consumer purchasing intent and behavior.

According to one of my friends that owns a staffing agency, LinkedIn is actually changing the way people seek and are being recruited for jobs.  Having a good LinkedIn profile can mean the difference between being hired or not.

Recruiters are searching the LinkedIn database to find candidates for specific positions.  They can use the free, “Advanced People Search” function available to all LinkedIn members. They can search members and activities within specific LinkedIn groups, and many others are using a paid service called LinkedIn Recruiter that provides significantly more search functionality.

In addition, similar to the way job seekers sign up for “job alerts” to get notified via email whenever a new job gets posted that meets a certain set of criteria, recruiters can also sign up for candidate alerts to notify them of new candidates who fit their requirements.

Unemployed people and those seeking better jobs need to learn how to optimize their LinkedIn profile to align with this process of job search and recruiting.  According to Marci Reynolds, CEO of J2B Marketing, a “Job Seeker 2 Business,”™ there are many things a job seeker can do to optimize their profile to help ensure that they “show up in the appropriate search results, show up higher than other candidates (LinkedIn SEO), and stand out among the search results. Some of her tips are:

  • Your profile should be 100% “complete,” per LinkedIn standards
  • Include a detailed work history, with clear job titles and well written job descriptions that describe both your responsibilities and your key accomplishments
  • Make sure your “industry” selection is tied to the job you want, not the job you had.
  • Make sure you have some recommendations from your connections
  • Use a professional, flattering profile photo that looks like you already have the role you’re seeking
  • Use a headline to effectively market your skills and abilities. Your LinkedIn headline is like your personal tagline

Klout: If you’re new to Twitter and haven’t heard of Klout, you will soon. Klout is the gold standard for measuring your influence on Twitter.  Klout uses several measurements to come up with a Klout Score for each and every Twitter user.

The Klout Score measures influence based on your ability to drive action. Every time you create content or engage you influence others. The Klout Score uses data from social networks in order to measure:

  • True Reach: the number of people you influence. When you post a message, these people tend to respond or share it.
  • Amplification: how much you influence people. When you post a message, how many people respond to it or spread it further? If people often act upon your content you have a high Amplification score.
  • Network Impact: the influence of the people in your True Reach. How often do top Influencers share and respond to your content? When they do so, they are increasing your Network score.

Klout assigns a number between 0 and 100 to represent how influential you are on Twitter.  This number may seem arbitrary, but it’s important for several reasons.

Firstly, Klout is a much better measurement of how “well” you’re doing on Twitter than your follower count. Not all followers may really be interested in what you have to say, so using this to measure your Twitter success is not a great strategy.  Klout uses a robust suite of different measurements – which includes engaged follower count – to come to one single Klout Score.

Secondly, Klout is important because it’s the standard measurement for influence in social media, and knowing your Klout score shows that you know a thing or two about tweeting.

Thirdly, focusing on increasing your Klout score will make you a better tweeter.  Klout emphasizes things like getting retweets and using @mentions to engage with your community. So if you change your Twitter strategy to try and increase your score, you will likely end up tweeting more frequently, replying to more users, and sharing more retweetable tweets.

There are several other contenders for influence measurement on Twitter, but Klout is the most talked-about, well-known influence measure out there, so it’s a good idea to familiarize yourself with it so you can join in the conversation.

Reshoring: Reshoring simply means returning manufacturing to America from offshore.

To help accelerate this trend, there is a new initiative with a plan to efficiently reduce our imports, increase our “net exports” and regain manufacturing jobs in a non-protectionist manner.  The Reshoring Initiative was founded by Harry Moser, retired president of GF Agie Charmilles LLC, a leading machine tool supplier in Lincolnshire, Illinois.  The Initiative shows how outsourcing within the United States can reduce a company’s Total Cost of Ownership (TCO) of purchased parts and tooling and offer a host of other benefits while bringing U.S. manufacturing jobs home.

Harry Moser said, “Reshoring breaks out of the waiting-for-policy-decisions problem, the economic zero-sum-game and the increases in consumer prices and assures that the pie grows to the advantage of all Americans.  Reshoring also focuses on the manufacturing sector that has suffered so many job losses for decades and the Small-to-Medium Enterprises (SMEs) that offer the best potential for job growth.”

The Initiative documents the benefits of sourcing in the United States for large manufacturers and helps suppliers convince their U.S. customers to source local.  Archstone Consulting’s 2009 survey showed that 60% of manufacturers use “rudimentary total cost models” and ignore 20% of the cost of offshoring.   If a manufacturer is not accounting for 20% of their costs to offshore, offshoring may not be the most economical decision.  In tough economic times and stiff global competition, no company can afford this.  To help companies make better sourcing decisions the Reshoring Initiative provides:

  • A free Total Cost of Ownership (TCO) software that helps manufacturers calculate the real offshoring impact on their P&L
  • Publicity to drive the reshoring trend
  • Access to NTMA/PMA Contract Manufacturing Purchasing Fairs to help manufacturers find competitive U.S. sources.

Manufacturing companies can reshore to:

  • Reduce pipeline and surge inventory impacts on Just-in-time operations
  • Improve the quality and consistency of products
  • Cluster manufacturing near R&D facilities, enhancing innovation
  • Reduce Intellectual Property and regulatory compliance risk
  • Reduce Total Cost of Ownership (TCO)

The Initiative has received increasing visibility and influence: recognition by Industry Week magazine through inducting Harry Moser into its 2010 Manufacturing Hall of Fame, inclusion of the TCO concept in Cong. Wolf’s (R VA) “Bring Jobs Back to America Act” (H.R.516); numerous webinars; dozens of industry articles; presentations in major industry and government policy conferences in Chicago and Washington, DC; and coverage by CBS, CNBC, WSJ, USA Today and the Lean Nation radio show.

The Initiative is succeeding in changing OEMs’ behavior. Companies have committed to reshore after reading Initiative articles.  Fifty-seven representatives from large manufacturers and 113 custom U.S. manufacturers attended the May 12, 2011 NTMA/PMA Contract Manufacturing Purchasing Fair, where OEMs found competitive domestic suppliers to manufacture parts and tooling.  Sixty-four percent of the OEMs brought back to the U. S. at least some work that was currently offshored.

Of all the trends mentioned above, the Reshoring Initiative has the potential to provide the most benefit for America as a whole by reducing our trade deficit and providing increased job opportunities jobs for the millions of unemployed.   Let’s embrace these present trends to create a better future!

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